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Growth of Mainland Live Streaming Prompts Legislatory Catch-up

With some 116 live-streaming operators now serving the mainland market, official moves are being made to regulate content, while ensuring that tax obligations are correctly assessed for the growing number of online celebrity hosts.

Photo: A taxing problem: The earnings of online hosts are proving hard to assess. (Xinhua News Agency)
A taxing problem: The earnings of online hosts are proving hard to assess.
Photo: A taxing problem: The earnings of online hosts are proving hard to assess. (Xinhua News Agency)
A taxing problem: The earnings of online hosts are proving hard to assess.

Globally, live-streaming video platforms have enjoyed explosive growth over the last 12 months. Nowhere has this been more evident than in China, with many of the country's online giants keen to secure their share of the huge profits on offer.

According to a recent survey by Askci (www.askci.com), a Shenzhen-based investment consultancy, there are now at least 116 live-streaming apps serving the mainland market. The same research also showed that, as of the end of June 2016, some 325 million people in China had accessed a live-streaming service, equating to 45.8% of the country's total number of internet users.

At present, live-streaming services operate under one of three models:

Live Streaming + Gifts Giving

This sees high-profile hosts employed to attract users through a variety of activities, including singing, dancing, chatting, dining, fitness exercises and range of other online entertainment. Viewers are then urged to buy virtual gifts for their favourite hosts, which are then shared between the host and the live-streaming platform. The most successful proponents of this particular model include YY Live (www.yy.com) and Liufangjian (www.6.cn).

Live Streaming + Games

Under this model, the live-streaming of online games and the provision of an interactive e-sports service are seen as perfectly complementing one another. The market leaders in this sector include douyu.tv, zhanqi.tv and huya.com.

Live Streaming + E-commerce

This variant has seen a number of established e-commerce platforms using live-streaming as a form of product promotion. This particular model has been championed by both taobao.com and mogujie.com.

Driven by the expectation of huge profits, many of China's leading digital businesses have lost no time in introducing their own live streaming services, often turning to celebrity endorsements as a way of kickstarting their channels. When launching its Xiaomi Mi Max live streaming facility, for instance, qzone.QQ.com secured the services of Qiao Shan, the star of the 2016 hit mainland rom-com Some Like It Hot. His subsequent live stream attracted a peak viewership of 11.4 million.

Similarly, working in conjunction with miaopai.com, the launch of Sina Weibo's live-streaming service was endorsed by several well-known movie stars. To date, Weibo's live live-streaming service has been accessed more than 100 million times. As an offshoot of this, many celebrities are now turning to live-streaming services as a way of directly engaging with their respective fanbases.

Despite – and, perhaps, partly on account of – the popularity and profitability of live streaming services, there are a number of issues emerging that are seen as potentially damaging to the sector. Most obviously, there is the problem of homogeneity, with many competing services offering, essentially, identical facilities and content. There is then the question of inappropriate content, with some service providers opting for material of an overly sexual, violent or politically contentious nature. Finally – and most prosaically – there is the issue of taxation, with the taxable income of online hosts, in particular, seen as difficult to calculate.

While the problem of homogeneity is being left to service providers to address for themselves, the matter of inappropriate content and the difficulties with taxation have both been subject to official intervention. In the case of content, three different government departments have issued clear requirements for the future management of live streaming services.

In September 2016, the State Administration of Press, Publication, Radio, Film and Television issued new guidelines entitled Strengthening the Administration of Online Audio and Visual Live Broadcasting Services. These spell out the management requirements and responsibilities for all operators of online audio and visual live-streaming services.

In November 2016, this was followed by an update from the Cyberspace Administration of China, entitled Provisions for the Administration of Internet Live-Streaming Services. As a priority, this called for all video hosts to register under their real names, while threatening to blacklist any individuals who transgressed acceptable practices.

This was followed, in December 2016, by a directive from the Ministry of Culture entitled Measures for the Administration of Online Performance Operating Activities. This made it a legal requirement for all online games to be vetted and approved before any proposed streaming activities could be initiated.

In terms of tax assessment, a circular from the Taxation Bureau of Chaoyang, a central district of Beijing, outlines the scale of the problem facing the financial authorities: "As a consequence of the booming internet celebrity economy, the transaction methods adopted by many companies in the sector are both flexible and diversified. Such transactions can be carried out free from geographical constraints, with companies tending to migrate to those regions offering the most preferential tax regimes. This makes it difficult to determine just where tax should be levied.

"While addressing the problem of an online celebrity who live-streams on several platforms and generates income in multiple locations, taxation authorities now have to make a greater efforts to conduct joint investigations on an inter-provincial basis."

The matter is complicated still further by the fact that the income of online celebrities is not restricted solely to gifts and can also include revenue from advertising and offline commercial performances. As a result, in order to correctly assess the income tax due from online celebrities, many tax departments are now scrutinising the management companies of each such individual in the location where they are actually based.

Such issues are seen as likely to only grow in significance, given the widespread expectation that the sector is poised for further expansion. Indeed, this belief was officially endorsed by a recent report on the prospects of China's online live-streaming industry jointly commissioned by the Policy and Economics Research Institute (part of the China Academy of Information and Communications Technology) and Wangsu Science and Technology, a Shanghai-based provider of online business solutions.

Taking the index of the first quarter of 2016 as the base – i.e. 100 – the positive industry sentiment indices of the second and third quarters were 149 and 237 respectively, up 49% and 59.06% quarter-on-quarter. As well as predicting that the live-streaming + model is set to take-off over the coming years, the report also identifies a number of sectors that will particularly benefit, most notably variety shows, education, medical, finance and e-commerce.

Liu Lu, Beijing Office

Content provided by Picture: HKTDC Research
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